The ringgit rose the most this year after an overnight rally in crude oil prices tempered concerns that Malaysia, an oil-exporting nation, will see revenue fall.

A drop in the dollar also supported demand for Asian currencies after data showed US retail sales declined in December by the most in almost a year. This prompted investors to pare bets for a Federal Reserve interest-rate increase, with futures indicating a 64% chance of a move by June versus 73% a week ago. Brent gained 4.5% yesterday (Jan 14), the biggest advance since June 2012.

The ringgit’s gains were driven by “the overnight rebound in oil prices,” said Gao Qi, a strategist at Royal Bank of Scotland Group plc in Singapore. “There’s broad dollar weakness on the back of poor retail sales in the US.”

The ringgit appreciated 0.6%, the biggest advance since Dec 18, to 3.5742 against the US dollar as at 9.38am in Kuala Lumpur, according to data compiled by Bloomberg. It earlier rose as much as 0.9% to 3.5633. The local currency fell to 3.6045 yesterday, the lowest since April 2009.

The ringgit has weakened 2.2% in the past month, the worst performance in Asia, on concerns that the slump in energy prices will make it more difficult for the government to meet its fiscal deficit reduction target.

Malayan Banking Bhd cut its first-quarter ringgit forecast to 3.70 from 3.50, and its year-end estimate to 3.50 from 3.45, due to the decline in oil prices and increased market volatility, analysts led by Saktiandi Supaat wrote in a report yesterday.

The ringgit’s one-month implied volatility used to price options is the highest after Indonesia’s rupiah in Southeast Asia at 9.53%. Meanwhile, the yield on Malaysia’s 10-year sovereign bonds was little changed at 3.98%, after declining 29 basis points, or 0.29 percentage point, in the last five days, data compiled by Bloomberg showed. — Bloomberg